Market Direction Heading Into Jackson Hole

I have not written too many market direction articles this week as I am recovering from the past weekend. My apologies for not writing more market direction articles but this week market direction has followed the market timing indicators completely which makes for easy market direction calls.

On the past weekend I wrote how the market was weak going into Jackson Hole. With little news last week and very thin volume the market wandered. This week the market direction has been moving lower as investors show concern over Ben Bernanke’s speech tomorrow at Jackson Hole.

Investors are hoping for QE3 to be announced by Bernanke on Friday. I doubt this is going to occur and today’s market direction pullback shows investors skittishness over the possibility that Bernanke will announce nothing. There are far too many signs that the US economy is nowhere near weak enough to require stimulus measures. The federal reserve has repeatedly indicated they stand ready to act when the need arises but with housing improving and employment still showing growth, albeit slowly, I cannot see the fed adding even more liquidity to the economy at this stage.

There were other issues today that got investors selling. Spanish officials were reported as saying they did not want a bail out until seeing the terms of any bailout. As well German unemployment rose for a 5th straight month. The Dow Jones closed down 106.77 points to 13000.71 and the S&P closed down 11.01 points to 1399.48, just below 1400.

Market Timing Indicators For August 30 2012

Market timing indicators for today show the continuing decline in market direction. All indicators are bearish. Momentum is 98.87 marking the first truly bearish momentum reading in 19 trading days.

MACD Histogram commenced to decline on August 24 and has continued to decline every trading day since.

The Ultimate Oscillator is negative.

Rate of Change went bearish yesterday and today reflects the pullback.

Slow Stochastic is bearish which indicates that the market should be lower into the middle of next week.

Fast Stochastic is very bearish and today’s reading at the market close indicates that unless something dramatic should happen the market will be lower on Friday.

market direction indicators for august 30 2012

Market timing indicators for market direction for August 30 2012

Market Direction Outlook For Jackson Hole

Going into Jackson Hole the market direction is looking for a clear sign from the Fed as to what they plan to do going forward. Investors hate uncertainty which is strange because risky assets are always uncertain. With the S&P right at 1400, the market is ready to retest the 1390 to 1395 area. If it should break, than the higher highs and higher lows from June 4 will have ended which could see a more meaningful correction.

Market Direction Summary

With market direction once again under pressure, the plan for me is to continuing selling small quantities of puts against my favorite stocks. If the market direction should move higher, I will be applying more capital into the market. If the market direction continues to decline I will be staying with small quantities of puts and will return to the SPY PUT for hedging against a more pronounced market direction decline.

September has a history of being tough on stocks. It will be interesting to see how well September treats investors.